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Wednesday, September 20, 2017

Shale Law in the Spotlight: UPDATE - The Delaware River Basin Commission’s Regulatory Actions on Natural Gas Development

Written by Chloe Marie
– Research Fellow

In this article, the Center for
Agricultural and Shale law presents an update of an initial article published
on August 23, 2017, addressing the Delaware River Basin Commission’s regulatory
action and inaction on natural gas development. Based upon action taken by DRBC
on September 13, 2017, an update of our prior article was necessary.

The
Delaware River Basin Commission (DRBC) is a federal interstate agency comprised
of the states of Delaware, New Jersey, New York, Pennsylvania and the U.S. Army
Corps of Engineers working together on the management of water resources in the
Delaware River Basin. In the past decade, DRBC has proposed regulatory actions
to address the impacts of natural gas development using hydraulic fracturing on
waters within the Basin. To date, however, DRBC has not finalized any
regulations. Without regulation in place, no shale development has taken place
within the Basin. Based on recent actions, DRBC appears to be moving towards
formalizing this ban on shale development within the Basin. This article will
address the actions proposed and undertaken by DRBC to regulate natural gas
development projects in the Basin as well as litigation challenging DRBC action
and inaction on this topic.

In
June 2008, DRBC imposed upon
energy companies the obligation to apply for and receive approval from the
Commission for any projects requiring water withdrawals, well drilling,
construction of water impoundment, and waste disposal into the waters of the
Basin. The Commission later issued a determination, dated May 2009, mandating
that all natural gas extraction projects located in shale formations within the
drainage area of the Basin’s Special Protection Waters must obtain approval
from the Commission.

In
May 2010, DRBC commissioners passed a resolution directing DRBC staff
to develop new natural gas development regulations prior to considering any
applications for natural gas wells. DRBC staff published the draft regulations (Article 7 of Part
III) for public review on December 9, 2010. In a Press Release of the same date,
former DRBC Executive Director Carol R. Collier declared that “the purpose of
the proposed regulations is to protect the water resources of the Delaware
River Basin during the construction and operation of natural gas development
projects. The draft regulations establish requirements to prevent, reduce, or
mitigate depletion and degradation of surface and groundwater resources and to
promote sound practices of watershed management.”

On
May 31, 2011, New York Attorney General Eric Schneiderman filed a lawsuit in
the U.S. District Court for the Eastern District of New York against the U.S.
Army Corps of Engineers and other federal agencies for failing to conduct a
full environmental review of the draft regulation pursuant to the requirements
of the National Environmental Policy Act (NEPA). The New York Attorney General stated that “the
welfare of those living near the Delaware River Basin, as well as the millions
of New Yorkers who rely on its pure drinking water each day, will not be
ignored.” A coalition of non-profit environmental groups filed a similar
lawsuit in the same court on August 4, 2011 alleging that “absent [an environmental]
review, there is no assurance that the regulations the DRBC is poised to
finalize will be adequate to control a risky industrial activity that has
already caused documented environmental and human health impacts in other
states, including Pennsylvania.” The U.S. District Court dismissed both
lawsuits contending that “this dispute [was] not currently fit for judicial
review.”

The public comment period for the
draft regulations ended on April 25, 2011 and after further discussions, DRBC
staff published revised draft
regulations on November 8, 2011. The draft regulations were to apply to “all
natural gas development projects as defined in Section 7.2 including the construction
or use of production, exploratory or other natural gas wells in the Basin
regardless of the target geologic formation, and to water withdrawals, well
pads and related activities, and wastewater management activities comprising
part of, associated with or serving such projects.” DRBC staff was to provide
the commissioners with an administrative and operational assessment of the
regulations within 18 months following the date on which those regulations
entered into force. The commissioners would in turn review this assessment
within 6 months of its receipt and would recommend some regulatory adjustments
if needed. These draft regulations would allow the impacts of such projects on
the water.

A special meeting was scheduled
originally on November 21, 2011, for the five Commission members, including the
governors of the states of Delaware, New Jersey, New York, and Pennsylvania,
and the federal representative of the U.S. Army Corps of Engineers, to vote on
passing the draft regulations. The meeting, however, was cancelled until the Commission members could
complete further review of the regulations, which had not been rescheduled. As
a result, no natural gas development projects have taken place within the
Delaware River Basin.

Interestingly,
in May 2016, Wayne Land and Mineral Group, LLC (WLMG) brought an action before
the U.S. District Court for the Middle District of Pennsylvania against DRBC
challenging the Commission’s jurisdiction to review and approve natural gas
projects located in the Delaware River Basin (see Wayne Land and Mineral Group,
LL v. Delaware River Basin Commission, docket no. 3:16-cv-00897). Owners of
land overlaying shale gas resources located in the Basin, WLMG claimed that its
rights to develop such resources were infringed upon by the Commission and
alleged that “natural gas well pads and related facilities targeting shale
formations” in the Basin are not “projects” to reviewed by the Commission under
Section 3.8 of the Delaware River Basin Compact. WLMG also explained that the
Commission is blocking any prospect of development as it announced in 2010 that
it would not review applications for natural gas projects until it adopts
specific natural gas development regulations.

In
early July 2016, the Commission filed a motion to dismiss the complaint, which
was granted by the court on March 23, 2017. The court concluded that “on the
face of Plaintiff’s Complaint, it is apparent that its proposed activities
within the Delaware River Basin constitute a ‘project’ within the meaning of
that term as defined in Sections 1.2(g) and 1.2(i) of the Delaware River Basin
Compact.” On April 11, 2017, WLMG filed an appeal in the U.S. Court of Appeals
for the Third Circuit (docket no. 17-1800), which is still pending at the time
of this article.

Six
years after cancelling the November 2011 meeting to consider the draft
regulations, DRBC approved a procedural
resolution on September 13, 2017, to prepare and publish revised draft
regulations addressing natural gas development by November 30, 2017. The
revised draft regulations will pursue a different regulatory approach than the
draft regulations as DRBC now proposes to implement a ban on hydraulic
fracturing. In the resolution, DRBC stated that “the revised draft rules to be
published … will include prohibitions related to the production of natural gas
utilizing horizontal drilling and hydraulic fracturing within the Delaware
River Basin” before adding that “the revised draft regulations will also
include provisions to ensure the safe and protective storage, treatment,
disposal or discharge of hydraulic fracturing-related wastewater where
permitted and provide for the regulation of inter-basin transfers of water and
wastewater for purposes of natural gas development where permitted.”

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The Center for Agricultural and Shale Law (CASL) provides information and educational programs on agricultural and shale law and policy for producers and agribusinesses, attorneys, government officials, and the general public. The Center does not provide legal advice, nor is its work intended to be a substitute for such advice and counsel.